Globalization is the expansion of business around the world thanks to advances in technology and transportation.
Globalization involves increasing the flow of:
- Goods and services
- Capital
- people
- International ideas
Although commerce is not a new concept, companies can become present in more areas around the world than ever before. But how did it happen? And which business industries are experiencing globalization? Keep reading to find out everything you need to know about globalization.
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History of globalization
The rich history of globalization began long before giant conglomerates like Amazon and Google existed. There is a timeline of discovery, protectionism, liberalization, financial crisis and economic development that can all be traced back to the period BC. Kr. while the phenomenon of international trade was developing.
Silk Road
The Silk Road was a cultural phenomenon that made luxury goods available in all countries from the first century BC to the fourteenth century AD. Silk was exported from China to Rome, meaning that many other countries were involved along the route.
However, with an abundance of wars and conquests and fallen empires altering the availability of routes, the Silk Road could no longer withstand turmoil or trade barriers, and eventually collapsed despite its export efforts.
Paths of spices
Spice routes flourished because they were tied to the spread of the Islamic faith. Prophet Muhammad was not only the founder of Islam but also a merchant who traded his spices while he preached throughout the lands.
This expansion lasted from the seventh to the 15th century, starting from the Arab heartland and spreading to places like Spain, India, Indonesia and Europe.
Age of discovery
From the 15th to the 18th century, explorers ventured into new lands and began to integrate the resources of these new lands into their economies through trade.
Countries began to establish global trade supply chains from the new country to their own country to other countries, thus expanding the world economy.
The first wave
At the turn of the 19th century, the most advanced form of globalization began. The British Empire continued to expand its reach, and the Industrial Revolution was in full swing.
With technological advances, the UK could produce goods in demand in all new parts of the world, including textiles and iron. Globalization grew exponentially over the next century and continued to expand rapidly until the world wars.
World wars
The First and Second World Wars stopped globalization. Although the war boosted the economy, it destroyed the trade cycle. By the end of World War II, the gross domestic product had fallen to five percent, the lowest percentage in a hundred years.
The second wave
The end of World War II brought more peace and trade. During the second wave of the industrial revolution, cars and airplanes were produced more than ever.
Due to increased access to transportation and the new free trade agreement, economic globalization has flourished more than ever.
Related: How close are we to a recession? International Monetary Fund He says the economy is facing its ‘biggest test’ since World War II.
The third wave
The third wave of globalization occurred after the collapse of the Soviet Union and the creation of the World Trade Organization (WTO).
The Internet began to take shape, transportation and communication technology became more manageable and accessible, and globalization seemed to make the world much smaller.
The age of technology
America and China lead globalization in the cyber age. E-commerce has grown significantly year on year and shows no signs of slowing down.
As operations become larger and more modern, production moves faster and faster. Deliveries can be made overnight, and the trade seems to have no borders. Follow how economists predict the impact of globalization in the coming years.
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Types of global businesses
An international company operates by selling or producing goods or services in more than one country. There are several different types of global business, each with a unique form of business.
Transnational corporations
This type of international corporation has offices in multiple countries, and each location is responsible for different organizational departments.
This means that one position can be focused on marketing, another on research, and the third on distribution. Each site operates independently of its specific service, working towards a single company goal.
Multinational corporations
This type of international corporation also has offices in multiple countries; however, each location has each department at each location – like a smaller version of its headquarters.
Related: 5 tips for building a successful multicultural company
For example, Nike is headquartered in Beaverton, Oregon, with departments from marketing to finance to market analysis. But Nike also has other full-service corporate locations in the Netherlands, Mexico City and Los Angeles.
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Considerations that global businesses must have
Whenever a company moves to a new environment, it must take into account the cultural nuances and factors of national economies.
Politics, politics, laws
A company operating across national lines must be aware of the legal requirements of the country it is moving to. As the country’s laws and trade policies change, a company must be aware of them and adhere to them to stay compliant.
Two key areas to focus on are human rights and labor laws, which vary from country to country. In addition, a company must keep abreast of current events and external affairs in order to maintain peace with its business operations and the country in which it is located.
Related: Compliance with European Union Online Companies Act
Environmental protection jobs
When a company decides to relocate or open an office in an international location, it must investigate environmental issues in the new country.
Countries around the world have different operational requirements to preserve their environment, so advocating for sustainability is key to respecting the new country and climate change.
economy
A company moving to another country must be aware of economic activity in its new territory. A company should research and monitor international economic trends before deciding to relocate.
Economic data to look out for include:
- Exchange rate
- Degree of income inequality
- Inflation rate
- Unemployment rate
- Gross Domestic Product (GDP)
Cultural differences
Other cultures have many differences and formalities that must be respected in order to maintain positive working relationships with their citizens.
For example, in a country it may be customary to exchange pleasantries before jumping into a business conversation. In addition, the company should have employees who speak the language or translators who are willing to show respect for the culture.
Advantages and disadvantages of business globalization
When making business decisions, it is crucial to weigh the advantages and disadvantages in order to make the most informed judgment possible. See the pros and cons of business globalization to form your own opinion.
Advantages of doing business globalization:
Benefits to the business and its economy include the following:
- Increased economic growth: Technological advances, international exchange of goods and other valuable information can improve a country’s income, standard of living and overall financial health.
- More affordable production: A wider price range is available when more goods are available, making products more accessible to consumers.
- It promotes international cooperation: countries that trade goods and services establish relationships and rely on each other for business ventures.
- Promotes job opportunity: When companies move to new countries, that means new jobs. Often, companies move to countries where they can find cheaper labor, which can help strengthen the workforce in poorer countries.
Disadvantages of business globalization:
The negative effects of globalization on the company and its economy include:
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- Inequality in economic growth and labor exploitation: The old adage “the rich get richer and the poor stay poor” applies to the globalization of business, as rich countries and multinational corporations often relocate to developing countries for cheap labor and lax labor regulations, reaping profits while paying incredibly low wages and offer a dangerous workplace Conditions.
- Reduced number of local companies: Companies that can relocate to other countries are likely to have enormous financial power, resources and a well-known name. This means that when these companies move in, they compete fiercely for local businesses and often shut down smaller establishments in the industry.
- Increased potential for global recession: When countries begin to form partnerships, it can cause interdependence for certain goods and services. If a country’s economy or labor force starts to decline, it can have a negative impact on the global market.
- Potential for job relocation: When a company decides to move its production to another country, every worker who had a job in that location is suddenly out of a job. If the company is big enough, it can negatively affect the entire economy of the country.
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What’s next for globalization in business?
Globalization is the expansion of business around the world thanks to advances in technology and transportation.
Over the centuries, the global supply chain has grown astronomically. As the world becomes more globalized, there is no telling where the financial markets will end up.
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